Question

Provide data showing the trend of interest rate change in South Africa over the past seven years. Analyse whether the economic theories attempting to explain and predict the effects of changes in this variable on the macroeconomy are consistent with the facts

Answer 1

Over last one decade African economy has grown up only by 1.4 % average annual rates.In last few years the GDP has weakened.Country is rich in mineral but poor in economy.

South Africa has increased its interest rate for the first time from 2016.2013 till 2015 economy was slow down thus there no change in the interest rates.

Economy has shown betterment from 2016 onward thus interest rates have been increased.Improved economy and controlled inflation gives positive impact on macro economy.

But still inflation is affecting the economic growth of the country.Higher the inflation lower the interest rates.Monetary policy of the country is trying hard to control inflation.

Again in 2017 interest rate was cut because of high inflation.

Inflation rate was touching around 7% and it slow down the economy.Due to higher inflation economy is also experiencing the recession.

2013 interest rate was 5% from there 2016 it was 7% and 2018 revolving around 6.5%

from 2017 till this date interest rate is revolving around 6.5%. thus monetary policy is seeing not much growth in the economy and trying to stabalise the economy through controlled interest interest rate.Lower rate is also encouraging for foreign investments.